Novartis becomes majority owner of Alcon
This article was originally published in Scrip
Novartis has completed its acquisition of a 52% stake in the eyecare firm Alcon from Nestlé.
The Swiss pharma giant paid $28.3 billion for the stake, taking its total share of Alcon up to 77%. It had bought a 25% stake in the company from Nestlé for $10.4 billion in July 2008.
Novartis's majority ownership of Alcon could allow it to pursue the remainder of Alcon more easily, having had previous attempts rejected. The close of the Nestlé transaction satisfied the condition of the election of Novartis's five nominations to Alcon's board, including three former employees of Novartis, which was made earlier this month. Six of the board's eight positions are now filled by Novartis-backed members, including Novartis's CEO Dr Daniel Vasella.
Alcon's independent director committee has repeatedly called Novartis's proposal for the remaining 23% stake inadequate. The offer is significantly less than the $180 per share that Novartis paid Nestlé for its 55% stake. Novartis's share price closed at $50.55 on 25 August, valuing its offer to Alcon at around $140 per share.
In response to the close of the Nestlé deal, the chairman of Alcon's Independent Director Committee Thomas Plaskett said: "We look forward to negotiating a deal that affords fair value to Alcon's minority shareholders… however, we are ready to defend the rights of Alcon and its minority shareholders if Novartis refuses to negotiate."
Nevertheless, Novartis hopes that through the majority ownership it can collaborate with Alcon on products such as Lucentis (ranibizumab), by using the companies' complementary field forces for the potential launch of the product for diabetic macular oedema (DMO), for example. Lucentis, already marketed with Novartis's partner Roche as a treatment for wet age-related macular oedema, improved vision loss in patients with DMO significantly more than did the current standard of care, laser surgery, showed results of the Phase III RESTORE trial presented in May (scripintelligence.com, 24 May 2010). The humanised antibody product was approved by the US FDA for the treatment of macular oedema following retinal vein occlusion in June (scripintelligence.com, 23 June 210).
The companies could also benefit from joint sourcing and procurement programmes that could leverage their combined purchasing volume, Novartis said. Other opportunities could include the optimisation of lens care manufacturing and research collaborations.
Novartis estimated that these "value creating synergies" could generate around $200 million in annual pre-tax synergies. The acquisition of Nestlé's stake in Alcon is expected to be broadly neutral to Novartis's reported 2010 and 2011 EPS.
Earlier this month, the US FDA ordered Novartis to sell its injectable miotic Miochol-E (acetylcholine chloride) to Bausch & Lomb to ensure that antitrust issues would not occur following the Nestlé transaction. Similar divestments were previously ordered by authorities in the EU, Canada and Australia (scripintelligence.com, 18 August 2010).
Alcon had sales of $6.5 billion last year and operating income of $2.3 billion, making it the world's largest eyecare company. It posted second-quarter 2010 sales of $1.9 billion, with pharmaceutical sales contributing $837 million.